Syria central bank lifts dollar sale restrictions (via AFP)The central bank in war-torn Syria has lifted restrictions on the sale of dollars to individuals, state news agency SANA said Wednesday, in a bid to curb black market trade. “Citizens may purchase foreign currency at banks, for non-commercial purposes…
Source: Tom Armistead of The Energy Report (8/13/13)
If the oil and gas industry were a sport, Barclays Analyst James C. West’s dream team would consist of large-cap, diversified oil-services companies drilling for either oil or gas offshore in the Middle East, with the bench stocked with players operating offshore in India, Asia, Australia and the Asia-Pacific region. In this interview with The Energy Report, West highlights industry growth spots around the world. The future, he says, is bright.
The Energy Report: James, you have said the energy industry is in the early stages of a strong, sustained upside trend. What’s driving that?
James West: Sustained high oil prices are driving a trend toward higher capital spending. Oil prices have been at elevated levels—above $100 per barrel ($100/bbl) for Brent and $85 and above for WTI (West Texas Intermediate)—for close to 40 months. Those are exceptionally good levels for most companies; they can make good profits on projects. Capital investments seem to be accelerating somewhat, particularly in the international markets.
North America is going through a little bit of an efficiency phase and a slowdown from rampant growth. That started after the financial crisis. Now the international markets, which are slower to recover after a financial crisis or downturn, as we saw in 2009, are starting to accelerate.
We recently released an update to our spending outlook, where we survey well over 300 companies in the oil and gas space. These companies represent about 90% or so of capital expenditures (capex) on exploration and production (E&P), and they are showing about 13% gain year-over-year (YOY) in the international markets for capital budgets. There have been some regional shifts, but that’s a pretty healthy number. Also, globally we’re showing about a 10% gain in spending. This is the fourth year in a row of double-digit gains driven by high, sustained oil prices, behind which are many factors, one being limited OPEC spare capacity.
TER: Is the trend equally strong for gas?
JW: I think it’s similar. It depends on what region of the world you’re looking at. The international markets tend to be more oil-focused—75–80% of the drilling in international markets is for oil. In the U.S., starting with the early 1980s up until two to three years ago, we were mostly a natural gas market. That’s changed, and now we’re mostly an oil market. About 75% of drilling is for oil, but we still produce a good amount of gas in North America. The expenditures, I think, are still more focused on oil, although natural gas is becoming a bigger mix of the overall energy consumption pie, and we expect that to continue.
We expect to see more drilling for natural gas in the future. We’re in a mini-downturn for natural gas in North America. But things like the industrial renaissance, the chemical renaissance, LNG (liquefied natural gas) exports and more LNG-fueled vehicles will spur more demand for natural gas, and that should help prices rise somewhat. I don’t think we’re going to go to the $10-plus/thousand cubic feet ($10-plus/Mcf) range, like we saw back in the early 2000s, but I think we’ll get back to the $4.50–5/Mcf range, which will spur more activity on the gas side of the U.S. and in Canada. But right now it’s more depressed. We’re focused on oil today.
TER: Geographically, where is it stronger and where is it weaker?
JW: International markets are generally stronger than North America, and the strength is in the Eastern Hemisphere. The majority of the growth today is in the Middle East. We see the Middle East growing some 28% YOY. That’s the highest growth in the industry. The second-highest growth for the industry this year is going to be in the area of India, Asia, Australia and the broader Asia-Pacific region, which is up about 19% YOY.
We do still expect about 12% growth in Latin America and probably about 10% growth in Russia, but Latin America is lagging the Eastern Hemisphere overall. There have been some budgetary shifts in Latin America and the elections in Venezuela; things typically slow a bit during election periods. That’s passed now and Venezuela’s ramping back up, but it’s going to impact the 2013 spend. In Mexico, they’re actually looking at a declining budget this year, as they’ve slowed spending in the north, although that should change as we go into 2014. Brazil is still growing as a market, but the new president of Petrobras (PBR:NYSE; PETR3:BOVESPA) is taking her time going through all the major contracts that company has, and growth in Latin America has slowed. The Eastern Hemisphere is really the biggest growth area for the industry, with the Middle East in the driver’s seat.
TER: And is the growth equally strong onshore and offshore?
JW: There is a bias toward the offshore. That’s true of the international markets in general. With international spending up 13%, as I said, I think that onshore spending could increase in the high single digits, with offshore spending up probably in the mid-teens in terms of percentage growth. That’s because of the vast number of new offshore rigs coming to the market, plus the secular growth that we see in the deepwater arena.
TER: And which companies do you like in this sector?
JW: The large-cap, diversified oil services companies are best positioned. They get the benefits of a rebound in the well count in North America, particularly the U.S. land market, which is in a recovery mode now, but also they are the companies that dominate the international business. That would beSchlumberger Ltd. (SLB:NYSE), our favorite in the group. Halliburton Co. (HAL:NYSE) is number two.
Halliburton did plead guilty to a misdemeanor with the Department of Justice because of the Macondo incident and paid a $200,000 fine as a result of that, but that’s pretty de minimis relative to the $1.4-billion ($1.4B) fine that Transocean Ltd. (RIG:NYSE; RIGN:SIX) paid to the Department of Justice and, of course, the BP Plc (BP:NYSE: BP:LSE) fines are well in excess of that. We think Halliburton’s ultimate exposure to the Macondo incident is going to be larger. It has taken a charge for about $1.3B, but has yet to fully settle with the Planning/Steering Committee and the states. That step has been pushed out a little bit because BP is trying to renegotiate its own settlement. So BP, being the biggest part of the whole puzzle here, is going to step to the front of the line.
That’s $1.3B on a company that is doing well over $30B a year in revenue, and we have forecast EBITDA for Halliburton of $6.2B this year and $7.7B in 2014. It can easily handle a fine of that nature. Recently Halliburton announced a $5B share-buyback authorization coupled with a $3.3B Dutch auction, which is underway right now to buy back shares.
TER: Going back to a subject you touched on, what could reverse slowing growth in Latin America?
JW: I think Venezuela’s already turned. It’s just going to take a little while to get the ramp-up going in Venezuela. It’s happening now, but it just takes some time to get moving. Mexico’s intention, at least the intention of the current President, appears to be to alter the constitution to allow international oil companies (IOCs) to invest in Mexico or to help Pemex, the national oil company, with unconventional resources like shale and deepwater. That would, of course, lead to more spending in Mexico. Brazil does have another production decline this year. It had a production decline in 2012 and again in 2013. Petrobras may reconsider its plans and may look to put more capital dollars to work. Other markets in Latin America are all going nicely—Colombia, Ecuador, Peru, Argentina. It’s just that Mexico, Brazil and Venezuela happen to be some of the bigger markets in Latin America.
TER: Hasn’t the opening to IOCs in Mexico been offered before? I thought it had been pretty strenuously resisted.
JW: It has been so far. Pemex has had a monopoly on Mexican oil and gas activity since 1938. I think at this point, with production hitting a 10-year-plus low in May, that it’s now understanding the need to bring in some talent to produce the unconventional resources that it does have both in shales and offshore. The resistance has been there and it’s been pretty strong, but it seems to be lessening somewhat.
TER: In Latin America then, which players would benefit the most from a turnaround? Are we talking mainly just the national oil companies?
JW: Well, they would certainly benefit from increased capital spending because it would drive their production, but really the big service companies are the ones that dominate those markets as well. For Schlumberger and Halliburton, those are $1B-plus markets in Mexico, close to $1B-plus in Brazil, probably a little bit less in Venezuela, but if those markets were to start to show better growth then certainly that would drive better revenue and better earnings from Latin America for all the companies involved.
TER: How is the unrest in Iraq affecting that country’s production?
JW: Very little at this point. The unrest is mostly in Baghdad, so the south is relatively safe. Kurdistan is actually probably one of the safest areas, as well the north. I think there are 11 international carriers that now fly into Erbil, which is the airport and the major city in Kurdistan. That tells you something about the comfort level of the international airlines that fly into Erbil.
Production is really being held back by two things. One, some of the major oil companies are shifting out of Iraq, not because of security issues, but because of contracts that they don’t like. They’re getting better contract terms elsewhere in the world. They have global portfolios that they have to manage. Number two, Iraq lacks the export capacity to export much more oil than it is already producing today, so we need to build export capacity in Iraq.
TER: What companies in Iraq are being affected then?
JW: All the big four service companies—Schlumberger, Halliburton, Baker Hughes Inc. (BHI:NYSE) andWeatherford International Ltd. (WFT:NYSE) are all in Iraq. There are some private operators as well. The only one that’s showing significant profitability in Iraq is Schlumberger, who has built up quite a franchise both in the south and in Kurdistan. It is benefiting the most from the growth in overall activity levels in Iraq. On the oil companies’ side, you can see who’s buying up the major oil company properties. It tends to be Russian oil companies and Chinese oil companies.
TER: There are other oil-producing countries that also have issues. Libya has strikes. There are sanctions on Iran. Between Sudan and South Sudan there are disputes. How are these issues affecting the world oil market and the companies you cover?
JW: It is holding some oil off the markets and keeping oil prices at elevated levels. If Iranian production were to return instantaneously, we would probably see a correction in the oil price. I’m not sure it would be a huge correction, but some correction in oil prices. The service companies do not work in Iran. Schlumberger is the only one, but it is winding down its operations now per its agreement with the U.S. government.
I don’t think any oil service companies have been able to work in Sudan for multiple years. Those two countries really have little impact to earn revenues and earnings for the oil service companies. With respect to Libya, there’s not a lot going on in Libya since the Arab Spring. While it used to be historically 1–2% of revenue and earnings for the industry, it basically went to almost zero and it’s remained that way for the last three years. Not much of an impact at this point in Libya.
TER: Why did you change your forecast from flat to 2% growth in North American E&P spending for this year?
JW: Twice a year, we survey some 300-plus oil and gas companies worldwide about their spending intentions, and these are the numbers we came up with in our discussions with the oil companies. The majority of the ones that permanently spend in the U.S. and in Canada were increasing budgets, mostly in the U.S. Actually, we revised Canada downwards whereas the U.S. we revised upward to a little over 3%. The net impact for North America was up 2% versus the flattish numbers we had been expecting in December. I think what drove that is better-than-expected cash flows for the oil companies, which were driven on one hand by somewhat higher natural gas prices than they anticipated and, on the other, by higher oil prices than they anticipated going into the year.
TER: So what plays are showing strength?
JW: The Bakken, the Permian, the Eagle Ford and certain parts of California are showing the most strength right now. On the gas side, the Marcellus is showing the most strength. There are some large, prolific service wells being drilled in the Marcellus.
TER: Which companies in North American oil and gas will benefit the most?
JW: In the oil areas, because these plays use more technology, you don’t need just fracturing equipment; you also need to understand the geology better, so you need seismic in some cases. You need better well placement technology, better well chemistry technology. It does play into the hands of the major oilfield service companies.
If you look at the big four, again, Schlumberger, Halliburton, Baker Hughes and Weatherford, and their market share in North America, 10 years ago they were probably 14–15% of the market. They’re now about 25–26% of the market. They’re benefiting a little disproportionately. We think the North American market is somewhat a market of haves, which would be the major oil companies and certain small mid-cap companies, and the have-nots, which don’t provide technology, but are more commodity players, and they’re being shut out of certain areas of the market and are unable to compete with the likes of a Halliburton or Schlumberger.
TER: You have said E&P companies are basing their spending budgets for this year on a WTI price of $86.50/bbl and a Brent price of $101/bbl, but the spread between the two has shrunk to a few dollars. What does this mean for oil E&P?
JW: We think that E&P companies are going to realize higher-than-expected commodity prices, which will drive higher-than-expected cash flow, which will drive capital spending probably higher than even our June forecast suggested. If you just look at the companies that reported so far this earning season, many have suggested two things: One, that they would spend at the higher end of their guidance range for capex. Two, several companies actually increased their guidance range for capex.
TER: Do you think the spread is going to get wider again?
JW: Our integrated oil analyst who covers the refiners does believe that this spread will widen once again and will be a positive driver for the refiners. It appears that we’re getting very sold out and moving oil by railcars. If that is the case and we start to see pockets of production that have no way to get out of the basin, then certainly the differentials could widen again.
TER: Can you give me the pluses and minuses on Schlumberger, Halliburton, Baker and Weatherford?
JW: Sure. The big four dominate most of the major technology-driven product lines of the industry. They are the largest in the international markets, which I think are growing faster, as we discussed. They are the companies that dominate the deepwater markets, particularly the first three, Schlumberger, Halliburton and Baker. Weatherford is more of a land-focused company and focused more on well integrity as its niche product lines.
Schlumberger is the biggest and the bellwether for the industry. It is larger in deepwater and offshore and in the international markets, whereas Halliburton and Baker are number two and number three and have a little more exposure than Schlumberger to the North American business, which, as we mentioned, is growing slower than the international markets.
The big four, though, even with the moves their stocks have had this year, are still trading at least a standard deviation off their historical averages. Schlumberger has been trading below the market multiple today, which is rare for the oil service industry. The oil service group, except in times of very low commodity prices and very little activity, trades at a premium to the market because the superior growth that occurs in the oil patch or within the oil service companies in general. Not only are they well positioned for how the spending is returning to the cycle, we also think these companies, on a valuation perspective, are inexpensive. In addition to that, we do believe that we’re on the cusp of earnings revisions higher for the oil service group, and as the market recognizes the growth cycle that we’re in, we think we will see better multiples placed on shares as well.
TER: Thank you very much for your time.
JW: You’re welcome.
James C. West is Barclays’ lead oil services and drilling analyst. West joined Barclays in September 2008. Prior to that, he was at Lehman Brothers beginning in October 2000. His broad coverage universe includes large-cap, diversified oil services companies, niche technology providers, offshore and onshore contract drillers, supply vessel providers and energy capital equipment companies. Prior to joining Lehman Brothers, West worked at Donaldson, Lufkin & Jenrette. He earned a Bachelor of Arts from the University of North Carolina at Chapel Hill.
Want to read more Energy Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Interviews page.
DISCLOSURE:
1) Tom Armistead conducted this interview for The Energy Report and provides services to The Energy Report as an independent contractor. He or his family owns shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report: None. Streetwise Reports does not accept stock in exchange for its services or as sponsorship payment.
3) James West: I or my family own shares of the following companies mentioned in this interview: None. I personally am or my family is paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
4) Interviews are edited for clarity. Streetwise Reports does not make editorial comments or change experts’ statements without their consent.
5) The interview does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer.
6) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Streetwise – The Energy Report is Copyright © 2013 by Streetwise Reports LLC. All rights are reserved. Streetwise Reports LLC hereby grants an unrestricted license to use or disseminate this copyrighted material (i) only in whole (and always including this disclaimer), but (ii) never in part.
Streetwise Reports LLC does not guarantee the accuracy or thoroughness of the information reported.
Streetwise Reports LLC receives a fee from companies that are listed on the home page in the In This Issue section. Their sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734.
Participating companies provide the logos used in The Energy Report. These logos are trademarks and are the property of the individual companies.
101 Second St., Suite 110
Petaluma, CA 94952
Tel.: (707) 981-8204
Fax: (707) 981-8998
Email: [email protected]
Article by Investazor.com
For a new trader basic strategies that apply the principles of fast moving averages are easy to understand.
The following system is applicable on all major pairs, with a time frame set on 1 hour (H1) or 15 minutes (M15), for indicators we will use the 10, 25 and 50 Exponential Moving Average (EMA).
At the point when the short term EMA (10) follows the path through the EMA (50), enter a buy or sell order in the exact direction of the EMA (10) after passing the EMA (50)
TIP: In order to not get tricked by fake signals, it’s better to wait for the current candlestick to close in the adverse direction of the EMA (15).
This forex strategy presents 2 options: close when EMA (10) make a reverse and intersects EMA (25) or when it returns and reaches EMA (50).
It’s recommended to use this technique when market is in a trending period or on massive price break-out / movement. The only downside is the fact that this type of indicator (Fast Moving Average) it’s the type of indicator that laggs, meaning that it shows current market situations not future ones. This situation is not so good, since signals can return fake situations and the trader need to monitor the market at any time (keep in mind to avoid this system when the market is not in a trend move but rather in a sideway moment).
The post The Fast Moving Average Crossover appeared first on investazor.com.
Hey, Wall Street? Anyone awake?
Apparently not yesterday, as the market snoozed through a mind-numbing session.
But the day was anything but boring for Osiris Therapeutics (OSIR) shareholders.
In fact, they were loving life.
Shares of the biotech company rocketed by 138% on Tuesday to their highest level since February 2007.
What could have triggered such a huge surge? A major announcement that the firm’s Grafix therapy for serious wounds had shown “overwhelming” effectiveness in diabetic foot ulcers.
[A similar announcement is scheduled to hit at exactly 5 PM EST today. The announcement will determine if your smartphone even works on Thursday. It’ll greatly impact the shares of a tiny $2 company, as well. Click here before 5 PM EST for the details.]
Almost two-thirds of patients who received Grafix saw their wounds completely close up (and in a faster time), compared to just one-fifth of patients who received the standard care.
Grafix contains living stem cells within a flexible membrane, which speeds up the healing process. Osiris hopes that the positive results will help it gain more insurance and Medicare coverage for its product.
The announcement sent shares of the $839-million market cap firm from $10.66 to $25.44.
This is typical of small-cap and micro-cap stocks. It doesn’t take too much to catapult the share price significantly higher in a very short time. All it took with Osiris was a favorable announcement, and investors had an incredible 138% one-day gain.
So when people ask me, “Is now a good time to buy small-cap stocks?” – and I get asked that a lot – my answer is always the same…
“Yes!”
But not just any small-cap stocks. I always insist on buying high-quality small caps. Because quality never goes out of favor.
Three Reasons to Bet Big on Small Caps
As Dan Veru, Chief Investment Officer at Palisade Capital Management, says, “There’s a perception that you’re taking a risk with small caps, but when you look back at 80 years of data, it’s rare when large caps outperform small caps.”
He’s right. And there are other compelling reasons why we should always bet on small caps to win big. Even better… they’re uniquely positioned to profit in the current market…
~Reason #1: The Trend is Our Friend
Bull markets flame out when large-cap stocks drive prices higher. But they endure when small caps lead the charge. And that’s precisely what’s happening.
As large caps (represented by the S&P 500) keep hitting record highs, small caps (represented by the Russell 2000 and Russell Microcap indices) are following suit.
Even more compelling… micro and small caps are in the midst of a breakout.
After trading in lockstep with large caps for most of the last year, small caps made a definitive move higher in late June. They’re now outpacing large caps by 10 percentage points (up 31.3% versus 21.1% over the last 12 months).
So by overweighting in small caps, we’re simply going where the strength in the market resides.
~Reason #2: Rock-Solid Fundamentals
Fundamentals ultimately drive share prices. And unlike large caps, small caps’ profit margins aren’t hitting historic highs right now. However, they are growing profits at nearly double the rate of large caps (9% versus 5% over the last year).
Sales growth is also better. Many small-cap companies keep announcing double-digit sales increases. But are large-cap companies making similar big announcements? Not so much. Sales growth for S&P 500 companies is only dribbling along at about 1.7% this year.
[An announcement concerning a certain micro-cap stock is scheduled to hit at 5 PM EST today. The announcement is ready to change the world, along with the fortunes of a tiny, $2-a-share innovator. Click here before 5 PM EST for the details.]
With the U.S. economy accelerating, small caps hold a distinct advantage. Roughly 80% of their sales are generated domestically, compared to about 65% for large caps. So if we want to bet on the resurgence of the good ol’ U.S.A., we should go with small caps.
Richard Bernstein agrees: “U.S. small-cap stocks have projected earnings growth right now that’s twice the projected earnings-growth rate of overly touted emerging markets [35% vs. 14%]. I don’t think people realize that.”
We do, which is precisely why we’re loading up.
Even if the U.S. economy stumbles, small caps are still (pardon the Beck reference) “where it’s at.” As Veru points out, “In periods of subpar economic growth… small caps outperform large caps by close to a 2-to-1 margin.”
~Reason #3: Prime Takeover Bait
Organic growth is getting harder to find for large caps. And with record cash balances in the bank, acquiring small caps to re-energize growth becomes more tempting. And lately, it’s been too tempting to ignore.
According to The Jordan, Edmiston Group, 99% of the 1,351 M&A transactions in 2012 were for $1 billion or less. The urge to acquire small caps has continued into 2013, too. Thomson Reuters data reveals that a total of 432 acquisitions of less than $1 billion were completed in the first quarter.
Tack on the fact that when these deals are announced, they come with an average bid premium of 35%, and the potential for a single-day payoff is too good to pass up.
Bottom line: It’s still harvest time for small caps, even though most retail investors remain clueless. At the end of 2012, small-cap value stocks, in particular, represented less than 1% of separately managed accounts, according to Coates Analytics.
But guess what? The near-total neglect means more profit opportunities for us.
You see, I’ve been tracking a tiny company through its entire innovation gauntlet. From the inception of a new idea to where we are right now…
On the verge of a MAJOR announcement at 5 PM EST tonight…
Attending the announcement will be…
Journalists.
Analysts.
Money managers.
And corporate executives.
When they report what just happened, it’ll hit the pages of every business publication in America. Social media will blow up, as well. Bank on it!
If my expectations are met, this announcement will shake the world to its core.
It’s ready to impact the shares of a tiny company trading for less than $3, too. (I have an uncanny history of being right about such things.)
But I’d like to keep everything as quiet as possible until the announcement officially hits later today.
So, in the spirit of resourcefulness…
Will you agree to keep this a secret for a few more hours?
I’ve made it virtually impossible for you to say “no.”
Ahead of the tape,
Louis Basenese
The post Three Reasons Why You Should Bet Big on Small-Cap Stocks appeared first on | Wall Street Daily.
Article By WallStreetDaily.com
Original Article: Three Reasons Why You Should Bet Big on Small-Cap Stocks
Shares in Asia started off the day in green on Tuesday, boosted by the weaken yen and the rise of Japanese equities. The Japanese yen weakened, second day in a row against the US dollar ahead of the US retail sales data.
With the Asian shares boosted by the unofficial news of the possible tax cuts, stocks in China advanced, and extending gains and driven by the good news from the country’s real estate market.
During the Australian session, most of the shares were seen in red due to the negative macroeconomic data reports..
The Japanese benchmark Nikkei 225 advanced 2.6% higher to 13,867.00 at the time of writing, while the broader Topix index jumped 2.00% higher to 1,157.15 at the same time.
South Korean Kospi index rose for the fourth day running at 1.50% to 1,913.03, while the Australian S&P/ASX 200 edged up 1.02% higher to 5,160.70.
Equities in China were also seen in green, following last week’s winning ending on Wednesday as the Hong Kong’s Hang Seng edged up 1.12% to 22,520.03 at the time of writing, while China’s
Shanghai Composite remained flat with 0.03% at 2,101.94.
The core machinery orders in the Chinese factories for the month of June beat the predicted estimates, but slightly dropped by 2.7 against the expected 7.1% estimate, according to reports from the Cabinet Office. The figure reported is believed to be the leading indicator of capital for China.
According to the minutes released from the Bank of Japan (BoJ) July’s meeting, the Bank is expecting the country to show an improved and moderate growth this year.
The post Shares in Asia climbs on weaker yen appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
European stocks in green on Tuesday after the better-than-expected report on the German investor sentiment for August showed an improvement.
The pan-European Euro Stoxx 50 rose 0.48% higher to 2,840.50 at the time of writing, while the German DAX gained 0.79% closing at 8,425.30 at the same time. The French CAC 40 advanced 0.37% to 4,086.80, while the UK’s FTSE 100 added 0.54% to 6,610.00.
The ZEW Economic Sentiment for Germany rose to 42.0 points in August, exceeding previous record of 36.3 for the month of July and analysts estimated reading of 39.9, according to reports from the Center for European Economic Research.
The ZEW survey shows that the current survey improved to 18.3 in the month of August from previous record of 10.6 in July.
The ZEW reports were released for Germany as well as the euro zone with reading that showed it rose to 44 points in the month of August from previous month’s record of 32.8 and estimated record of 37.4%.
Consumer prices in Germany rose slightly in the month of July by 0.5% on a monthly basis, while on a yearly basis, the consumer prices picked up 1.9%, according to reports from the Federal Statistical Office.
While the Euro zone industrial production slightly rose by 0.7% in the month of June on a monthly basis, while on an annual basis it rose by 0.3%, according to the European statistical office Eurostat.
The post Europe shares in green on positive German ZEW sentiment appeared first on | HY Markets Official blog.
Article provided by HY Markets Forex Blog
By Profit Confidential
A stock market strategist who I trust and respect is advocating that investors take some money off the table and book profits from U.S. equities.
His view is that, with declining earnings expectations for the bottom half of the year combined with mostly zero top-line growth, the likelihood of reduced monetary stimulus and lackluster global growth do not warrant a rising stock market. The market’s expectation for an improving U.S. economy is already priced into share prices.
But while this market strategist makes a very good case for taking profits in U.S. blue chips, there still isn’t anywhere else for most investors to go other than the stock market. This gentleman thinks that a rising cash position is warranted and that the cash can then be put to work in the next correction and/or recession.
Cash in the bank is always a good thing, but there is an “opportunity cost” to not being in the stock market’s best positions. (See “This Star Pharma Company Delivers the Goods Once Again.”)
From my own perspective, I find it difficult taking profits in blue chips like Johnson & Johnson (JNJ) with a current price-to-earnings ratio of around 20 and a 2.9% dividend yield. With an earnings plus dividend growth rate of approximately 10% over the next 12 months, JNJ to me is a big “Hold.”
And there are many other blue chips that I wouldn’t sell either, even though they have done extremely well on the stock market recently.
Realistically, I come back to the old adage that it usually doesn’t pay to fight the Fed. With a change in monetary policy somewhat likely this September, the Fed’s actions will be the catalyst for correction, even though the stock market’s been due for a correction for months now.
The perception of certainty is a Wall Street staple, and that’s what the central bank has provided to date. Monetary policy, at least in the near-term trading action, always overrides the marketplace’s real financial metrics. Second-quarter earnings and revenue growth among blue chips was mediocre, at best.
There has been, however, a continued resiliency in the stock market this entire year, and the market’s strength, even in the face of weak news, is difficult to trade against.
I’m certainly an advocate for creating lists of good companies that would be worth accumulating when they are down. Given the current information, however, I wouldn’t be selling the market’s best-performing blue chips in anticipation of the future.
With investor sentiment interwoven with the next Fed meeting in a little over a month, I expect stocks to basically move sideways, save for a shock. The argument for lightening up on U.S. equities makes total sense with declining earnings expectations, yet the one thing that the market strategist I mentioned above is not quantifying is investor sentiment itself.
This is still a market that wants to bid stocks, regardless of a mediocre outlook. There is also some asset rotation taking place, as some investors move out of bonds. The resiliency continues.
Article by profitconfidential.com
By Profit Confidential
It’s ironic that BlackBerry Limited (NASDAQ/BBRY) announced that it was looking at viable strategic alternatives on Monday on the same day speculation grew that rival Apple Inc. (NASDAQ/AAPL) could be looking at launching a much-needed new “iPhone” in September.
So, BlackBerry appears to be throwing in the towel, which, of course, I have said it should have done since the iPhone became the go-to smartphone in the U.S.
BlackBerry CEO Thorsten Heins—once the optimist—appears to be facing reality in light of the market gains in not only Apple but also Samsung and “Android”-based smartphones. BlackBerry’s new line of the “Z10” and “Q10” are good phones, but it’s a case of too little too late. While the Z10 may be technically better than the iPhone, the difference was simply not enough to sway users to give up their iPhones and “Galaxys” (Samsung).
Even on the low end of the smartphone market in the emerging markets, BlackBerry was not faring well and is losing market share to cheap Chinese phone makers ZTE and Huawei Technologies. There’s also speculation that Apple may finally be launching a cheaper version of its iPhone to compete in the low-cost but critical markets in Asia and Latin America. Apple was recently meeting with some of the top mobile-phone providers in China. We can guess why.
While BlackBerry is dead as a viable investment (the company does have some valuable patents), Apple is now at a critical juncture of its history. You kind of wish the late Steve Jobs were still around. The stock has rallied but remains far below its high of $705.00.
Apple’s chart shows the decline from the peak, but the stock was able to hold at $400.00. The blue oval indicates the breakout from the downtrend, but for the stock to have enough legs to move higher, the company must deliver some fresh news that it can compete globally.
Chart courtesy of www.StockCharts.com
Apple is still king in America, but watch out for Samsung.
What Apple needs to do is to compete with Samsung in the global economy as well as Nokia Corporation (NYSE/NOK) and the other cheap smartphone providers. We are talking about a market with well over a billion users, and that’s huge for any smartphone maker.
If Apple can somehow cut the cost to buy its phone in the emerging markets (read “Whoever Does This First Will Be the Winner in the Smartphone Market”), then it has a chance to become that $1,000 stock that many had expected it to be. It will not be easy, but it is possible.
Article by profitconfidential.com
By Profit Confidential
Pick a map and point a finger at a major country, and chances are it’s either in an outright economic slowdown or showing weakness in its economic activity.
Take India. According to the country’s federal statistics office, in June, industrial output in the country contracted 2.2% from a year ago—expectations were for contraction of 1.2%. What’s even worse is that capital goods production for the month of June in India fell 6.6% from a year ago. This is important to note: capital goods production shows the level of investment activity in an economy. If investment slows, it’s an indication of an overall economic slowdown ahead. (Source: Reuters, August 12, 2013.)
Similarly, Japan, the third biggest economic hub in the global economy after China and the U.S., is also showing troubling statistics. The Japanese Ministry of Economy, Trade and Industry reported that seasonally adjusted industrial production for June declined 3.1% from a month ago. (Source: Ministry of Economy, Trade and Industry, August 12, 2013.) Remember: the Bank of Japan and the Japanese government have been working together to boost economic activity in the country through aggressive money printing.
In 2011, half of the companies on the S&P 500 provided figures about their sales from the global economy. The companies that reported said their sales from the global economy accounted for 46.1% of the total sales. (Source: S&P Dow Jones Indices, August 2012.)
Half of the S&P 500 companies getting sales from elsewhere in the global economy? That’s correct. Now, consider what happens to key stock indices as the global economy faces the threat of economic slowdown.
As the global economy deteriorates, and demand slows, even if we assume for a second that the U.S. economy is showing robust performance, the sales of half of the S&P 500 companies will be affected.
I find optimistic stock advisors to be completely ignoring the threat of economic slowdown in the global economy.
What we already know: as of August 2, the second-quarter corporate earnings growth rate of S&P 500 companies stood at 1.7%. (Source: FactSet, August 2, 2013). Earnings growth for the S&P 500 companies is clearly stalling! And we are seeing analysts reduce their estimates on the third-quarter corporate earnings growth rate of S&P 500 companies.
The odds of a severe economic slowdown in the global economy are increasing each passing day. It can’t be stressed enough: the global economic slowdown will have a deep impact on the key North American stock indices.
Article by profitconfidential.com
By Profit Confidential
In this market, real economic growth is a tough thing to come by. So, when you get real outperformance, it’s worth taking note.
Not too long ago in this space, we considered AAON, Inc. (AAON) out of Tulsa, OK. This is a good micro-cap enterprise that manufactures and installs heating, ventilation, and air-conditioning equipment—otherwise known as “HVAC.” The company just reported another solid quarter of genuine economic growth. (Also see “How the Old Economy Can Pay More Than You Might Think.”)
According to the company, its sales in the second quarter of 2013 grew to $91.2 million—up nine percent from sales of $83.3 million generated in the same quarter of 2012.
Earnings were an impressive $12.1 million, representing a gain of 30% over earnings of $9.3 million in the comparable quarter. AAON’s earnings per share were $0.33 for a gain of 32% over earnings per share of $0.25 in the comparable quarter. For any public company, these kinds of financial metrics are unusual these days.
For the first half of 2013, the company reported record sales of $158 million—up seven percent. First-half earnings were up 39% to $19.3 million.
I’ve followed this company for years, and equally as impressive as its growth has been is the company’s penchant for honest disclosure regarding business conditions. This is another thing that’s tough to come by these days.
Management said that second-quarter revenue and earnings growth was due mostly to price increases and a decline in the cost of materials. The company’s backlog increased to $66.2 million as of June 30, 2013, from $62.2 million comparatively. This is down from a record order backlog of $71.7 million as of March 31, 2013.
Company management said that it still expects 2013 to be a record year for revenues and earnings, but they also noted that there’s been a “noticeable softening” in business conditions recently.
AAON beat Wall Street’s second-quarter consensus estimates on revenues and earnings. According to the company’s track record of reporting and disclosure, I believe what this company says about its operations. It lends weight to the potential for the next recession.
As mentioned, AAON is a good company with a solid track record of wealth creation for shareholders and what I consider to be honest disclosure as a public corporation.
When I hear or read about “softening” from company management, it goes against what Wall Street is hoping for.
AAON is just one more small piece of the puzzle that makes me think that a technical recession is increasingly likely within the next 12 months. A recession within a secular bull market is perfectly normal, and historically, the U.S. economy is due for one.
I remain very cautious regarding the stock market and its outlook. The Federal Reserve has been in charge of equities for a number of years now, but change is in the air as Ben Bernanke’s term is almost up.
If you’re not interested in the mature industry of HVAC, consider following AAON anyway. It’s a straightforward business that offers the real deal. For sure, there are not enough of these kinds of public companies around.
Article by profitconfidential.com
